A Financial Planner’s Advice on What NOT to Do in Your 20s

Your twenties can be a challenging time when it comes to your finances—you’re young, you’re free, and you’re just starting out in your career, but you’re also likely in debt and still learning about how to successfully plan your spending and saving for next month, let alone ten years down the road (and everything in between).

As Marie Thomasson, financial planner and owner of Modern Assets, puts it, “Your 20s are all about exploring, making mistakes, and growing, but still, it’s time for a little adulting.” To help you get on a good track, Thomasson shared some of the top financial missteps people take in their 20s, and some advice for what to do instead.

If you’ve got student loans, it’s important that you know what you’re doing with them. “Do you know the details of your student loans? Private or Federal? Deferred or income-based repayment? APR?” Thomasson asked. “Not paying attention to this details seems like no big deal, until you realize one loan is double the interest of another, or maybe you shouldn’t be doubling down on loan payments just yet.”

There’s a chance you could be saving money while paying off your loans, and you don’t even realize it. “Don’t wait until you’ve been paying them down for ten years to discover you could have saved thousands,” Thomasson said.
“It’s a total drag, but schedule a time to sit down and review all the details.” She also suggested calling your lender and discussing your loans, because it might work out in your favor. “It’s a great idea to call and just ask what your options are. You might be surprised to find you’re eligible for loan forgiveness, or that you can defer one and pay down another.” And since no one enjoys calling customer service, Thomasson suggested rewarding yourself a little when it’s all said and done.

Still struggling even with your loans all figured out? “This is where adulting really starts to suck,” Thomasson said. “You took out those loans, and now you have to pay for them. This is where the side gig can save you. It could mean babysitting or waitressing a few nights.”

On the other hand, you can also take the time to work on your other skills, or develop new ones—Thomasson said it’s worth the short-term financial hit to invest in yourself. “Pick up a new skill that’s freelance worthy, or double down on the job if doing extra means picking up skills you can monetize,” she said.

“The most profitable paths usually don’t happen the fastest, but it could not only help you chip away at your debt, it can also set you up for a plan B if that first job is taking you in the wrong direction, or even worse, you aren’t moving,” Thomasson said. “You’ve already spent plenty for your formal education, so try to bootstrap professional skills wherever you can.”

“If you have a substantial student loan debt, this can be a very easy trap to fall into,” Thomasson said. But as tempting as it is to take the highest paying job you’re offered, it’s much more important that you get yourself on a career path that you love and can continue to learn from. “If you’re serious about your career, evaluate job opportunities as practical training, because that’s exactly what they are,” Thomasson said. “If you’re not continuing to learn throughout your 20s, you lose out long term.”

You may not be able to put a ton of money away in the first few years of your career if you take this path, but you’ll reap other benefits for the rest of your life—and eventually make up for it. “Careers and lifespans are getting much longer, and it’s better to sacrifice a few thousand in the 401(k) for a few years than to get trapped in a career,” Thomasson said. “Use your twenties to try different career paths and diversify your experiences. You’ll be more valuable when you have a unique set of skills that can’t be found in any one job.” Plus, she added, changing jobs means you get to level up with each new experience and challenge, and you’ll continue to build your confidence.

Speaking of not being able to put tons of money away—Thomasson said you shouldn’t worry too much about not having a huge savings. “I did just recommend you prioritize your real world education over salary in your twenties,” she said. “There is a cost to everything, and it might mean you have to sacrifice your savings. Don’t stress it too much.”

Thomasson explained that it’s later in life when you’ll be able to make the bulk of your savings—if you have the opportunity to save, go for it, but if you’re in debt, she suggested focusing on that instead. “You’ll probably acquire over 80 percent of your net worth after the age of 40. If your employer offers a match to your retirement, that’s free money. Take it! But if that’s not an option, and there’s no room for savings, go hard on your debt, and don’t add to it.”

Of course, doubling down on paying off your debts means you’ll need to rethink your spending on other things. “This might mean getting creative for extras like clothes and entertainment—thrift shopping anyone?” Thomasson said, adding suggestions like “bunking up with a roommate or three, or having no-spend challenges with other cash strapped friends.”

If you’re on the path to get married in your 20s, do your best to keep costs—and especially debt—to a minimum. “Life will not stop if you do or don’t get married,” Thomasson said. “You can make the case for loans to get you through college, but there’s no such excuse for a wedding.”

Thomasson suggested waiting until you have the money for the wedding you want instead of putting yourself in debt, because you’re better off to pay out of pocket than to let your credit cards take care of it. “If you’re footing part or all of the bill, don’t start executing your plans till you’ve got your wedding budget in the bank,” she said. “Committing to paying for your wedding out of pocket is huge motivation, and you’ll be amazed at the things you thought were essential, that maybe aren’t.” She also noted that it helps to get creative and DIY what you can.

With social media, we’re constantly bombarded with photos of beautiful things and places, and wanting to have it for yourself is natural—it just can hurt your wallet in the process. “The YOLO call is strong,” Thomasson said. “Resist. It will suck to feel like everyone else out there is living it up with their amazing vacations, fabulous homes, and on fleek wardrobes.” But, you can have the things you want without breaking the bank—you just have to find ways to make it work (DIY is your friend!).

“Instagram is like a high school popularity contest that never, ever ends,” Thomasson said. “This is the modern day keeping up with the Joneses, except now you’re competing with people with more resources at their disposal than you will likely have in a lifetime.” Rather than stay broke trying to keep up, do what makes you happy and what works within your means.

Networking may not seem like a financial issue, but ultimately, it’s about your career choices and growth (which obviously shapes your financial future!). “The contacts you make in your 20s will likely be the foundation of your professional network the rest of your career,” Thomasson said. “Networking is critical to your future career success and your bottom line—the more connected you are, the better you will fare.”

And if you’re not branching out beyond your industry, you’re doing it wrong—you never know when you’ll need people outside your chosen career path. “If you’re a lawyer and want to change careers, and your whole network is lawyers, you’re in trouble,” Thomasson explained. “Take the time to strengthen connections with people in fields you think you’d like to be in, or just think are cool.”

Thomasson suggested looking for local industry events and focusing on meeting and connecting with at least one person at each one—but remember, it’s not enough to just meet them. “Just as important is to maintain the connections,” she said. “The goal is to be friendly, if not friends, with these people. That’s where opportunities happen.”